TuSimple Plans Layoffs That Could Cut at Least Half Its Workforce Next Week

The retrenchment follows a dramatic series of events, including the removal of the chief executive in October after a board investigation concluded that TuSimple had shared confidential information with a Chinese startup. TuSimple faces multiple federal investigations into its relationship with the Chinese startup, Hydron Inc.

TuSimple President and Chief Executive

Cheng Lu,

who previously held the CEO job and returned to the position in November, said on Friday, when asked for comment on the planned layoffs, that he intended “to right the ship, and this includes ensuring the company is capital efficient.”

The company plans to scale back significantly its work on building self-driving systems and testing self-driving trucks on public roads in Arizona and Texas, the people familiar with the matter said. As part of the downsizing, much of TuSimple’s operation in Tucson, Ariz., where it does a lot of its test driving, will be eliminated, and the team that works on the algorithms for the self-driving software will be pared back significantly, the people said.

TuSimple will focus on building out a software product that matches self-driving trucks with shippers that have freight to haul, with the aim of offering freight transport at a lower cost than human-driven trucks, the people said.

This month, TuSimple and Navistar International Corp. said they had jointly ended a two-year-old partnership. TuSimple had planned to incorporate its self-driving systems into Navistar trucks that would be sold to freight haulers starting in 2025. TuSimple doesn’t build trucks itself.

Employees have been bracing for the layoffs. Early this month, Mr. Lu sent an email to staff that said management was reviewing “our people expenses, the biggest part of our cash burn,” according to a copy viewed by The Wall Street Journal. He advised employees “to focus on the work at hand.”

TuSimple, based in San Diego, told employees this week that offices would be closed Tuesday and Wednesday, the people said. The job cuts are expected to be announced on Tuesday, they said.

TuSimple is cutting costs and scaling back its ambitions as it reels from a string of crises this year, including a crash of one of its self-driving trucks in April, the loss of key business partnerships, two CEO changes, a plummeting stock price and concurrent government investigations. Federal authorities are probing whether TuSimple improperly financed and transferred technology to Hydron, the Journal reported in October.

TuSimple has struggled to generate significant revenue as its technology remained in a testing phase; in the first half of the year, it reported $4.9 million in revenue on $220.5 million in losses. That revenue largely came from hauling freight for shippers in trucks while keeping a human driver behind the wheel. In recent weeks, some of those partners, including McLane Company Inc., have moved to distance themselves from TuSimple, according to people familiar with the matter.

“McLane is aware of the recent leadership, operational and route changes at TuSimple and is in communication with their team. We are in the process of assessing the business relationship with TuSimple and will determine the next course of action in due time,” said Larry Parsons, McLane’s chief administrative officer.

In October, following a board investigation and the day after the Journal reported that the Federal Bureau of Investigation, Securities and Exchange Commission, and Committee on Foreign Investment in the U.S., or Cfius, were investigating TuSimple, the company’s board fired then-CEO

Xiaodi Hou.

After being ousted, Mr. Hou joined forces with fellow co-founder Mo Chen, who is also the leader of Hydron, to fire the board. Together they brought Mr. Lu back to run the company. Mr. Chen now controls the company with 59% of the voting power, while Mr. Hou has 30%, according to securities filings.

Last month, accounting company KPMG LLP said in a letter to the SEC it had resigned as TuSimple’s auditor as a result of the board firing, which also involved dismissing TuSimple’s audit committee.

TuSimple has announced leadership changes in an effort to get back into compliance with regulators and public stock market rules. This included adding two independent board directors and a security director to its board. Cfius had required the security director role as part of a national-security agreement with the company, but TuSimple fired the previous security director.

TuSimple’s stock closed at $1.54 on Friday, a 75% decline over the past two months and down 96% from its 2021 initial public offering price.

Write to Heather Somerville at heather.somerville@wsj.com